UPDATE 1-Greece borrows 1.62 bln, 6-month T-bill yield drops
Tue Jul 12, 2011 6:43am EDT
*
Greece raises 1.625 bln euros from sale
* Yield down 6 basis points to 4.90 pct vs June auction
* Bid-cover ratio 2.88 vs 2.58 in previous sale
* Foreign investors buy around 22 pct of issue
(Adds details, dealer comment)
By George Georgiopoulos
ATHENS, July 12 (Reuters) - Greece raised 1.625 billion euros in an auction of six-month T-bills on Tuesday to roll over maturing short-term debt, paying lenders a slightly lower yield than in a similar sale in June amid rising debt concerns.
There were less foreign investors participating in the sale than a month ago.
"The sale went well considering the tension in the markets and the fact that there were other borrowers out there today like
Italy," said a chief dealer at a Greek bank, who declined to be named.
Coming a day after euro zone
finance ministers met in Brussels, promising cheaper loans and longer debt maturities but declining to rule out the possibility of a selective default, demand in the auction turned out slightly higher than in June.
The bid-cover ratio was 2.88 compared to 2.58 in the previous sale but foreign bidders bought less of the issue -- 22 percent compared to a 37 percent take-up in June.
Policymakers have been seized with a new sense of urgency after Italy came under market attack last week, fearing that delays in putting together a second Greek aid package could poison investor confidence in weak economies around the region.
BOND MARKET
Under its current bailout Athens faces a funding gap next year. It is highly unlikely to be able to return to bond
markets as was originally planned and is looking forward to a second package to take it through to mid-2014.
Italy's short-term cost of borrowing jumped by 150 basis points compared to last month but markets breathed a sigh of relief that managed to place the full amount of 6.75 billion euros it sought.
The gross yield on its one-year bills rose to 3.67 percent.
Greece's auction fetched 1.625 billion euros, including 375 million in non-competitive bids. The issue was priced to yield 4.90 percent, down 6 basis points from an auction in June and above the rate of about 4.2 percent Greece pays on its EU/IMF bailout loans.
Up until March, Greece was funding itself on short durations at a lower cost than the 5.2 percent rate on its bailout loans. A later summit of
euro zone leaders agreed to cut the rate by one percentage point and stretch out the repayment period.
Settlement date for the six-month T-bill auction will be July 15 when a previous 2.4 billion euro issue matures. The debt agency will auction three-month paper on July 19 to roll over 2.0 billion euros of bills maturing on July 22.